Acquisition of Stability Inc. (Tables)

12 Months Ended

Dec. 31, 2016

The actual purchase price has been allocated as follows (in thousands):



Cash paid at closing	$	6,000
Working capital adjustment	(480		)
Common stock issued (441,009 shares)	3,346
Assumed debt	1,771
Fair value of earn-out	17,450
Total fair value of purchase price	$	28,087

Net assets acquired:
Debt-free working capital	$	2,456
Other long-term assets	199
Property, plant and equipment	1,375
Deferred tax liability	(5,896		)
Subtotal	(1,866		)
Intangible assets:
Customer relationships	5,330
Patents and know-how	6,790
Trade names and trademarks	450
Non compete agreements	830
Licenses and permits	390
Subtotal	13,790
Goodwill	16,163
Total Assets Purchased	$	28,087

Working capital and other assets were composed of the following (in thousands):
Working capital
Cash	$	140
Prepaid Expenses and other current assets	100
Accounts receivable	2,001
Federal and state taxes receivable	28
Inventory	9,002
Accounts payable and accrued expenses	(8,815		)
Debt-free working capital	$	2,456

Current portion of long term debt	$	(194	)
Long-term debt	(560		)
Line of Credit	(932		)
Shareholder loan	(85		)
Assumed debt	$	(1,771	)

Net working capital	$	685

The fair value of stock consideration was determined as set forth below:



Common Share Price at Closing on 1/13/2016		$	8.43
Multiplied by: Number of Common Shares Transferred to the Sellers		441,009
Indicated Value of Equity Consideration (on a Freely Tradable Interest Basis)		$	3,717,706
Less: Marketability Discount @ 10%	[a]	(371,771		)
Fair Value of Equity Consideration Transferred		$	3,345,935
[a] Shares transferred to the Sellers are restricted securities pursuant to Rule 144. As such, the Sellers are prevented from selling the shares for a period of six months. In addition, they are subject to contractual lockups which restrict sales for up to twelve months following the closing of the transaction.

The intangible assets were assigned the following lives for amortization purposes:



		Estimated useful life (in years)
Intangible asset:
Customer relationships		12
Patents and know-how		20
Trade name and Trademarks		Indefinite
Non compete agreements		4
Licenses and permits		2

Goodwill reconciliation (in thousands):



Balance at 3/31/16	$	22,912
Goodwill Adjustments (a)	(6,749		)
Balance at 12/31/16	$	16,163
(a) Goodwill is the result of a residual calculation

The measurement period adjustments are as follows (in thousands):



	Provisional Per			Measurement Period
	3/31/2016 Form 10Q			Adjustments 2016			Final

Cash paid at closing	$	6,000		$	—		$	6,000
Working capital adjustment	(480		)	—			(480		)
Common stock issued	3,346			—			3,346
Assumed debt	1,771			—			1,771
Fair value of earn-out	25,620			(8,170		)	17,450
Total fair value of purchase price	$	36,257		$	(8,170	)	$	28,087

Net assets acquired:
Debt-free working capital	$	2,179		$	277		$	2,456
Other assets, net	199			—			199
Property, plant and equipment	1,375			—			1,375
Deferred tax liability	(8,268		)	2,372			(5,896		)
Subtotal	$	(4,515	)	$	2,649		$	(1,866	)
Intangible assets:
Customer relationships	$	6,090		$	(760	)	$	5,330
Patents and know-how	9,170			(2,380		)	6,790
Trade names and trademarks	830			(380		)	450
Non compete agreements	1,080			(250		)	830
Licenses and permits	690			(300		)	390
Subtotal	17,860			(4,070		)	13,790
Goodwill	22,912			(6,749		)	16,163
Total Assets Purchased	$	36,257		$	(8,170	)	$	28,087

Unaudited pro forma information for the twelve months ended December 31, 2016 and 2015 (in thousands) is as follows:



	Years Ended December 31,
	2016	2015
Revenue	$245,563	$204,481

Net income	$12,611	$24,960

Income per share, fully diluted	$0.11	$0.22